Perng and banks meet on enhancing credit control

Central bank Governor Perng Fai-nan (彭淮南) yesterday met with heads of nine major domestic banks to discuss how to strengthen control and management of real-estate mortgages, especially loans for luxury houses.

Perng’s move reflected his concern that a resurging housing market might stoke inflation, following the recent spike in public expectations that consumer prices would rise after the government raised prices for petroleum-based fuel products. Electricity prices are also scheduled to rise next month.

Last week, Chinese-language newspapers reported that a new luxury apartment complex built by CMP Group (勤美集團) in Taipei sold for a record NT$3.04 million (US$102,970) per ping (3.3m2).

While the selling price may have been exaggerated by the media or the construction firm, the reports have caught the central’s bank attention, prompting Perng to invite the heads of Bank of Taiwan (台灣銀行), Land Bank of Taiwan (土地銀行), Taiwan Cooperative Bank (合作金庫銀行), Hua Nan Commercial Bank (華南銀行) and five other banks to discuss the issue.

A central bank statement said Perng had asked the banks to strengthen risk controls when reviewing mortgage loans.

“The [central] bank will maintain its current credit controls on the housing market, especially for luxury construction projects, by stepping up case by case reviews of [these projects],” Huang A-wang (黃阿旺), director-general of the banking examination department at the central bank, told a media briefing.

The central bank does not rule out enhancing control by initiating cross-ministerial coordination, Huang added.

He said no bank has been punished by the central bank since it initiated the credit controls on the property market in July 2010.

Most of the banks that joined the meeting said they had stopped accepting credit applications for luxury homes, while the remainder said they only constitute a small part of their loan portfolios.